SFT Whitepaper 01 | Overview: What is an SFT?

Meng Yan
6 min readOct 14, 2022


The Ethereum Foundation approved ERC-3525 Semi-Fungible Token as its 35th ERC token standard on September 5, 2022, putting semi-fungible tokens (SFT) on par with fungible tokens (ERC-20) and non-fungible tokens(ERC-721). But why do we need another token standard? Aren’t the massive market sizes of ERC-20 assets and ERC-721 NFTs abundant evidence that the crypto world already has everything it needs to succeed? What can ERC-3525 really offer us that existing standards cannot? This book is dedicated to answering these questions.

What is an SFT

ERC-3525 is a general-purpose and omni-asset token standard that combines the quantitative attributes of an ERC-20 token and the descriptive features of an ERC-721 token (NFT). While ERC-20 can represent currencies, company stocks, and point systems, and ERC-721 can represent arts, collectibles, and digital goods, ERC-3525 is a versatile digital representation of ownership with ties to certain values. Assets an ERC-3525 SFT could represent range from simple instruments like a gift card, loyalty card, check, or a store voucher, to heavy-duty things like a bond, future or option contract, ETF, ABS, or a land title.

SFTs are highly descriptive, capable of not just displaying jpegs and gifs but also real-time on-chain data feeds and attachment of files. A user can fractionalize an SFT or combine multiple SFTs in the same manner as they would ERC-20 tokens. This is because an ERC-3525 token is identified by a unique ID but can also perform quantitative operations on other SFTs so long as they share the same SLOT — a unique mechanism of ERC-3525 that gives a like-kindness to otherwise unique entities. For example, two ERC-3525 bond SFTs with the face value of $200 and $300 and the identical maturity date, interest rate, and issuer ID displayed on the image could be quantitatively combined into a $500 bond.

The ERC-3525 is open-source, meaning developers can use it to build any asset they desire.

FT, NFT, and SFT

ERC-3525 is semi-fungible, leveraging the middle ground between the fungibles and non-fungibles, and since these concepts are confusing to many, we will explain them in this section.

Tokens that are fungible can be exchanged for one another. A fungible token can represent a currency, company stock, or a point system. In 2015, Ethereum’s co-creator Vitalik Buterin proposed that token systems with ties to conventional value, such as sub-currencies such as USD and company stocks, would be easy to implement on Ethereum. In the same year, the ERC-20 was released, allowing developers to create interoperable token applications using fungible tokens.

Unlike fungible tokens, non-fungible tokens (NFT) are unique and cannot be interchanged. An NFT has a unique ID consisting of the address of the governing smart contract plus a serial number, and metadata containing the attributes of the NFT. As each NFT is unique, an NFT represents a variety of digital goods and assets like music, sound clips, pictures, gifs, and game items. ERC-721, proposed by William Entriken and others in early 2018, is the definitive standard for NFT, and there was more than 36 billion dollars worth of NFTs minted in early 2021.

Most of the crypto assets today are ERC-20 and ERC-721 tokens, and most of the EIP (which stands for Ethereum Improvement Proposal) is either the application-level extensions or the adaptations of these token types. In the same vein, ERC-3525 is an extension of ERC-721 and is fully backward compatible with ERC-721.

Before the SFT, several protocols in DeFi (decentralized finance) recognized the immense potential of the NFT for its descriptiveness and went on to build related products related to the NFT: Uniswap V3 LP tokens utilize ERC-721 to represent the unique liquidity position of LPs; Centrifuge allows users to onboard real-world assets as NFTs and secure a loan with those NFTs. Despite their potential, NFTs used in DeFi (often called financial NFTs) are gradually losing their edge as certificates attesting economic ownership, partly due to their illiquidity, partly due to their inflexibility.

To fill this gap, ERC-3525 Semi-Fungible Token was created. An ERC-3525 token is a dynamic, liquid, and flexible representation of digital ownership because

It is semi-fungible. With a unique ID and rich metadata, an SFT can describe complex information but is also fractionalized as its underlying asset is liquid like an ERC-20 token.

● It can contain any digital assets. The SFT is a digital asset container that allows users to not only store any type of digital asset but also send and receive it directly from it.

● It is intelligent. An SFT can interact with a complex environment and executes a code when triggered by messages or transactions.

● It is structured finance-ready. An SFT can structure any assets within itself regardless of token type or fungibility.

● It is expressive. An SFT user can directly access real-time on-chain data about a financial position via the self-generated SVG.

Using blockchain technology and smart contracts, ERC-3525 SFTs provide a transparent, trustless, efficient, and self-executing solution. By leveraging the full potential of distributed ledgers, they offer exciting applications and the ability to create smart assets, including but not limited to

● Monetary gifts (coupons, checks, and “red envelopes”) — Deposit any digital asset into an SFT as the underlying asset which may be withdrawn or inspected by the owner.

● Certificates of deposit (CDs) and annuity — Lock or unlock an asset immediately or at equal or unequal intervals when certain conditions are met.

● Pawn tickets — Secure a loan with an SFT and redeem it after paying back the principal and interest.

● Acceptances — Receive the face value of an SFT from its issuer (who may or may not be a bank). At maturity, buyers of fractional shares of SFT will be entitled to redeem their shares.

● Streaming payments — Block-by-block payments in real-time between SFTs. Users can modify or halt the payment at any time.

● Debt instruments — Issue a flexibly-collateralized bond through an SFT. SFT bonds can be traded on the open market in whole or fractions, and buyers will receive principal and interest on a pro-rata basis at maturity.

● Structured products — Package indices, ETFs, etc., pre-packaged into an SFT to create a structured product or risk-adjusted portfolio. Allocate seniority-based structured SFTs to one or multiple investors.


This book explores ERC-3525 semi-fungible tokens. To begin, we’ll define a token, and then we’ll explore what makes a token fungible (or non-fungible). Continuing from Chapter 1, we’ll explore how some DeFi protocols, such as Uniswap V3 and Centrifuge, use NFT for financial purposes and why the so-called financial NFT doesn’t deliver what is expected. In Chapter 3, we’ll explore semi-fungible tokens thoroughly, including their use cases, core mechanisms, and other technical and non-technical implications. Chapter 4 examines the use of SFTs through some of the earliest products developed by Solv Protocol, the creator and first adopter of ERC-3525. In Chapter 5, we give a sneak peek into how Web3 assets will evolve and how the SFT can play an important role in that process. The information in this book is accurate to the best of the Solv team’s knowledge. As the crypto space is rapidly evolving, the content of this book is prone to error. We are open to feedback from those who wish to improve the validity and scope of the book. Reach out to us via ERC-3525 @solv.finance

Intrigued? You can download the whitepaper here: https://sftlabs.io/

A telegram group for EIP-3525 builders: https://t.me/EIP3525_DEV



Meng Yan

Co-founder of Solv Protocol, Co-author of ERC-3525 standard